How to Legally Hire a Nanny: Nanny Taxes Explained

The legal essentials of household employment, in plain terms, and where to get them handled right.

Hiring a nanny the right way is less complicated than it first appears, but it does involve real legal steps that many families either overlook or get wrong. Getting them right protects you from penalties and protects your nanny's rights, and it begins with a single, foundational fact: in nearly all cases, a nanny is your employee, not an independent contractor.

That distinction drives everything. Because you direct what your nanny does and how and when they do it, the law treats you as a household employer, which means your nanny should receive a W-2, not a 1099. Misclassifying a nanny as a contractor to avoid the obligations is, in the eyes of the authorities, tax evasion, and it is a mistake families sometimes make innocently and pay for later.

As a household employer, your core obligations generally include obtaining an employer identification number; verifying your nanny's eligibility to work; withholding and paying Social Security and Medicare taxes once you cross the annual wage threshold the IRS sets; paying federal and, usually, state unemployment taxes; and filing the right forms at the right times through the year. Many states add their own requirements, and several require household employers to carry workers' compensation insurance. Income tax withholding for your nanny is generally optional but often sensible. We cover the specifics, including the current thresholds, in our dedicated guide to nanny taxes.

Beyond taxes, household employment carries wage and labor obligations: at least the applicable minimum wage, overtime for hours beyond forty in a week for most roles, and, in a growing number of states and cities, additional protections bundled as a Domestic Workers' Bill of Rights, covering things like rest, paid time off, and written agreements. These rules vary meaningfully by location.

The honest truth is that doing all of this by hand is time-consuming, the IRS estimates household payroll compliance takes dozens of hours a year, which is why most families use a specialist household-payroll service or an accountant to register them, run payroll, withhold and remit correctly, and file the year-end forms. It removes the burden and the risk in one step, and we are glad to point families to a trusted payroll partner so it is handled properly from the first paycheck.

A clear caution: tax thresholds, wage rules, and labor laws change every year and differ by state. This is general information, not tax or legal advice. Confirm the current requirements for your situation with a qualified professional before you act. That conviction is the heart of how Nannies + more…® works.